Correlation Between Eaton PLC and Spirent Communications
Can any of the company-specific risk be diversified away by investing in both Eaton PLC and Spirent Communications at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Eaton PLC and Spirent Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eaton PLC and Spirent Communications plc, you can compare the effects of market volatilities on Eaton PLC and Spirent Communications and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Eaton PLC with a short position of Spirent Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton PLC and Spirent Communications.
Diversification Opportunities for Eaton PLC and Spirent Communications
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Eaton and Spirent is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Eaton PLC and Spirent Communications plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirent Communications and Eaton PLC is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Eaton PLC are associated (or correlated) with Spirent Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirent Communications has no effect on the direction of Eaton PLC i.e., Eaton PLC and Spirent Communications go up and down completely randomly.
Pair Corralation between Eaton PLC and Spirent Communications
Assuming the 90 days horizon Eaton PLC is expected to generate 0.44 times more return on investment than Spirent Communications. However, Eaton PLC is 2.29 times less risky than Spirent Communications. It trades about 0.11 of its potential returns per unit of risk. Spirent Communications plc is currently generating about 0.0 per unit of risk. If you would invest 14,697 in Eaton PLC on September 3, 2024 and sell it today you would earn a total of 20,903 from holding Eaton PLC or generate 142.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eaton PLC vs. Spirent Communications plc
Performance |
| Timeline |
| Eaton PLC |
| Spirent Communications |
Eaton PLC and Spirent Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eaton PLC and Spirent Communications
The main advantage of trading using opposite Eaton PLC and Spirent Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton PLC position performs unexpectedly, Spirent Communications can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Spirent Communications will offset losses from the drop in Spirent Communications' long position.| Eaton PLC vs. Goodyear Tire Rubber | Eaton PLC vs. Summit Materials | Eaton PLC vs. Materialise NV | Eaton PLC vs. URBAN OUTFITTERS |
| Spirent Communications vs. Addus HomeCare | Spirent Communications vs. United Rentals | Spirent Communications vs. Hyster Yale Materials Handling | Spirent Communications vs. Corporate Office Properties |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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